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Covanta bulls look for more gains

Shares of Covanta popped after strong quarterly results yesterday morning, and option traders are looking for more gains by the end of the year.

More than 2,000 December 22.50 calls were purchased in less than half an hour yesterday, led by a print of 1,744 that went for $0.55, according to optionMONSTER's Heat Seeker real-time tracking program. The volume was more than double the strike's open interest of 928 contracts before the trades appeared, indicating that this is fresh buying.

These long calls , which lock in the price where traders can buy shares, are looking for CVA to rally above $22.50 by mid-December. If the stock remains below that strike price, the contracts will expire worthless. (See our Education section)

CVA rose 2.86 percent yesterday to close at $20.89. The company, which generates electricity by burning garbage, had been trading mostly sideways for months but gapped higher at yesterday's open after beating earnings and revenue estimates in the pre-market.

Total option volume in the name yesterday was more than 17 times its daily average for the last month. Only 219 calls traded in the session, reflecting the day's bullish sentiment.